In a move that apparently surprised many islanders the Chief Minister of Norfolk Island David Buffett announced on 6 November 2010 that the island would voluntarily surrender its tax free status in return for a financial bailout from the federal government to cover significant debts.[1]

It was announced on March 19, 2015 that self-governance for the island would be revoked by the Commonwealth and replaced by a local council with the state of New South Wales providing services to the island. A reason given was that the island had never gained self-sufficiency and was being heavily subsidised by the Commonwealth, by $12.5 million in 2015 alone. It meant residents would have to start paying Australian income tax, but they would also be covered by Australian welfare schemes such as Medicare. [2]

The Norfolk Island Legislative of Assembly decided to hold a referendum on the proposal, to be held on 8 May 2015. Voters were asked if Norfolk Islanders should freely determine their political status, their economic, social and cultural development, and to "be consulted at referendum or plebiscite on the future model of governance for Norfolk Island before such changes are acted upon by the Australian parliament." [3]

The outcome of the referendum echoed a resounding 'Yes' with 68% of the vote confirming that Norfolk Islanders should have the right to determine their political and cultural development freely and not have it imposed upon them. The Norfolk Island Chief Minister said that "the referendum results blow a hole in Canberra's assertion that the reforms introduced before the Australian Parliament that propose abolishing the Legislative Assembly and Norfolk Island Parliament were overwhelmingly supported by the people of Norfolk Island". [4]

The Norfolk Island Legislation Amendment Bill 2015 passed the Australian Parliament on May 14, 2015 (Assented on May 26, 2015) abolishing self-government on Norfolk Island and transferring Norfolk Island into a council as part of New South Wales law.[5] From July 1, 2016 Norfolk Island legislation will be transferred to New South Wales and subject to NSW legislation.[6]

Controversy exists as to the exact status of Norfolk Island. Despite the island's status as a self-governing territory of Australia, some Islanders claim[8] that it was actually granted independence at the time Queen Victoria granted permission to Pitcairn Islanders to re-settle on the island. These views have been repeatedly rejected by the Australian parliament's joint committee on territories, most recently in 2004, and were also rejected by the High Court of Australia in Berwick Limited v R R Gray Deputy Commissioner of Taxation.[9]

Disagreements over the island's relationship with Australia have been put in sharper relief by a 2006 review undertaken by the Australian government. Under the more radical of two proposed models proposed as a result of the review, the island's legislative assembly would be reduced to the status of a local council.[10]

Residents of Norfolk Island who are citizens of Australia and meet the normal enrolment requirements are required to enroll to vote in both Australian federal and New South Wales elections and once enrolled must vote. Once local council is set up on Norfolk Island, residents are required to enroll to vote also.

From July 1, 2016 Norfolk Island residents come under Australian levies, personal or business income and corporation taxation by the Australian Tax Office. Also both Centrelink and Medicare will apply to Norfolk Island. Currently all visitors to Norfolk Island, including Australians, are recommended to purchase travel insurance. Serious medical conditions are not treated on the island and are instead flown off. This cost can amount to tens of thousands of dollars to the user if travel insurance is not taken out.

Some residents on Norfolk Island advocate Independence from Australia. In 2013, Chief Minister Lisle Snell claimed that Norfolk Island could survive alone. [11] He also told Radio Australia that 'Norfolk-Pitcairn people see themselves as a people with some rights to self-determination' that the Island's future relationship with Australia was not clear, but also stated that for the time being they need to integrate further with Australia for financial reasons. [12]

As a territory of Australia, Norfolk Island does not have diplomatic representation abroad or within the territory. It is however a full participant in the Commonwealth Parliamentary Association (an international organisation) and a member in its own right of a number of international sporting organizations (e.g. the Olympics).